The Principal Financial Group to Acquire HSBC AFORE

Company continues expansion of Mexican pension business

April 11, 2011 04:00 PM Eastern Daylight Time

DES MOINES, Iowa--(BUSINESS WIRE)--The Principal Financial Group®, Inc. (NYSE: PFG) announced
that Principal Financial Group, S.A. de C.V., Grupo Financiero has
agreed to acquire 100% of HSBC AFORE, S.A. de C.V. (HAFO) from Grupo
Financiero HSBC, S.A. de C.V. for approximately US $198 million based on
current exchange rates (Mexican Pesos 2,360 million). In addition, The
Principal® and HSBC Bank have agreed to establish an
exclusive distribution arrangement, subject to regulatory approval, for
the distribution of Principal AFORE’s products through HSBC’s extensive
network of more than 1,100 branches. HSBC has one of the largest banking
networks in Mexico. The AFORE transaction is expected to be immediately
accretive to EPS and ROE, and is expected to close by early third
quarter 2011, subject to regulatory approval.

According to Larry D. Zimpleman, chairman, president and CEO of The
Principal, “In our February 2011 earnings call, we said we were
evaluating various alternatives for our approximately $700 million of
deployable capital. Certainly these include acquisitions that are
aligned with our focused strategies, are complementary to our existing
businesses, and are fairly priced. This opportunity in Mexico clearly
fits our criteria.”

Upon approval, HSBC AFORE will merge with the Mexican pension fund
business of The Principal, making Principal AFORE one of the fastest
growing pension providers in Mexico. The acquisition will increase
Principal AFORE’s pension assets by $2.9 billion or 62 percent and add
1.6 million customers. The combined AFORE will become the country’s
sixth largest in assets under management with more than seven percent
market share and fourth largest by customers with nearly 11 percent
market share.

“The HSBC AFORE business fits naturally with our international strategy,
providing critical scale and expanding our growing base in key emerging
markets like Mexico,” said Norman Sorensen, chairman of Principal
International. “The Principal is an established retirement leader with a
strong commitment to Mexico and Latin America. We have a proven track
record managing and administering employee retirement plans, and have
successfully integrated a number of AFORE businesses since first
establishing our company presence in Mexico in 1993. The AFORE business
is complementary to our mutual fund business in Mexico, and we expect
that both AFORE and voluntary savings will continue to grow.”

“Since the economic recession in 2008, Principal AFORE has achieved a
compounded annual growth rate of 32 percent in assets under management,
reflecting Principal AFORE’s ability to meet the country’s increasing
need for world-class retirement and financial services,” added Luis
Valdes, president of Principal International. “Looking ahead, we expect
continued growth at an even faster pace as Mexico’s middle class
continues to expand.”

Forward looking and cautionary statementsThis press release
contains forward-looking statements, including, without limitation,
statements as to operating earnings, net income available to common
stockholders, net cash flows, realized and unrealized losses, capital
and liquidity positions, sales and earnings trends, and management's
beliefs, expectations, goals and opinions. The company does not
undertake to update or revise these statements, which are based on a
number of assumptions concerning future conditions that may ultimately
prove to be inaccurate. Future events and their effects on the company
may not be those anticipated, and actual results may differ materially
from the results anticipated in these forward-looking statements. The
risks, uncertainties and factors that could cause or contribute to such
material differences are discussed in the company's annual report on
Form 10-K for the year ended Dec. 31, 2010, filed by the company with
the Securities and Exchange Commission, as updated or supplemented from
time to time in subsequent filings. These risks and uncertainties
include, without limitation: adverse capital and credit market
conditions that may significantly affect the company’s ability to meet
liquidity needs, access to capital and cost of capital; continued
difficult conditions in the global capital markets and the economy
generally, that may materially adversely affect the company’s business
and results of operations; the risk from acquiring new businesses, which
could result in the impairment of goodwill and/or intangible assets
recognized at the time of acquisition; impairment of other financial
institutions that could adversely affect the company; investment risks
which may diminish the value of the company’s invested assets and the
investment returns credited to customers, which could reduce sales,
revenues, assets under management and net income; requirements to post
collateral or make payments related to declines in market value of
specified assets may adversely affect company liquidity and expose the
company to counterparty credit risk; changes in laws, regulations or
accounting standards that may reduce company profitability; fluctuations
in foreign currency exchange rates that could reduce company
profitability; Principal Financial Group, Inc.’s primary reliance, as a
holding company, on dividends from its subsidiaries to meet debt payment
obligations and regulatory restrictions on the ability of subsidiaries
to pay such dividends; competitive factors; volatility of financial
markets; decrease in ratings; interest rate changes; inability to
attract and retain sales representatives; international business risks;
a pandemic, terrorist attack or other catastrophic event; and default of
the company’s re-insurers.

About the Principal Financial GroupThe Principal Financial
Group® (The Principal ®)1 is a leader
in offering businesses, individuals and institutional clients a wide
range of financial products and services, including retirement and
investment services, life and health insurance, and banking through its
diverse family of financial services companies. A member of the Fortune
500, the Principal Financial Group has $318.8 billion in assets under
management2 and serves some 19.1 million customers worldwide
from offices in Asia, Australia, Europe, Latin America and the United
States. Principal Financial Group, Inc. is traded on the New York Stock
Exchange under the ticker symbol PFG. For more information, visit www.principal.com.

1 "The Principal Financial Group" and “The Principal” are
registered service marks of Principal Financial Services, Inc., a member
of the Principal Financial Group.2 As of Dec. 31, 2010.